DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), CHENNAI, CHENNAI vs. SOUTHERN AGRIFURANE INDUSTRIES PVT LTD, CHENNAI

“6.7.3 The undersigned has carefully examined the issue under The undersigned has carefully examined the issue under The undersigned has carefully examined the issue under consideration. As e consideration. As evident in the assessment order, it can be seen vident in the assessment order, it can be seen that the AO based upon the findings of the search in the case of that the AO based upon the findings of the search in the case of that the AO based upon the findings of the search in the case of m/s. SNJ Group of concerns has recorded reasons that the m/s. SNJ Group of concerns has recorded reasons that the m/s. SNJ Group of concerns has recorded reasons that the appellant company has made bogus purchases by inflating the appellant company has made bogus purchases by inflating the appellant company has made bogus purchases by inflating the purchase expenses related t purchase expenses related to purchase of old bottles from its o purchase of old bottles from its vendors. The satisfaction arrived by the AO is only a prima facie vendors. The satisfaction arrived by the AO is only a prima facie vendors. The satisfaction arrived by the AO is only a prima facie satisfaction. The AO on the basis of the incriminating materials satisfaction. The AO on the basis of the incriminating materials satisfaction. The AO on the basis of the incriminating materials found and seized at the third party premise and on receipt of the found and seized at the third party premise and on receipt of the found and seized at the third party premise and on receipt of the satisfaction recorded by satisfaction recorded by the AO of the searched party formed the AO of the searched party formed reasons to believe that the seized material has a bearing in the reasons to believe that the seized material has a bearing in the reasons to believe that the seized material has a bearing in the determination of the total income of the appellant company for determination of the total income of the appellant company for determination of the total income of the appellant company for the years under consideration. the years under consideration.

6.7.4 Therefore, the AO has rightly assumed jurisdiction u/ 6.7.4 Therefore, the AO has rightly assumed jurisdiction u/ 6.7.4 Therefore, the AO has rightly assumed jurisdiction u/s 153C of the Act for the years under consideration…” of the Act for the years under consideration…” to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt :: 5 ::

Consequent to the rejection of books of accounts and estimation of Consequent to the rejection of books of accounts and estimation of Consequent to the rejection of books of accounts and estimation of profits, the Ld. CIT(A) deleted all other separate disallowance(s)/ profits, the Ld. CIT(A) deleted all other separate disallowance(s)/ profits, the Ld. CIT(A) deleted all other separate disallowance(s)/ addition(s) on account of Section 14A & sales promotion expenses made addition(s) on account of Section 14A & sales promotion expenses made addition(s) on account of Section 14A & sales promotion expenses made by the AO. Further, in AY 2018 by the AO. Further, in AY 2018-19, the disallowance made by the AO on nce made by the AO on account of deduction claimed u/s 80G of the Act was deleted and the account of deduction claimed u/s 80G of the Act was deleted and the account of deduction claimed u/s 80G of the Act was deleted and the claim made u/s 80GGB of the Act was dismissed. claim made u/s 80GGB of the Act was dismissed.

According to her therefore, the AO had validly According to her therefore, the AO had validly recorded the satisfaction ed the satisfaction before assuming jurisdiction u/s 153Cof the Act jurisdiction u/s 153Cof the Act. She also invited our . She also invited our attention the notice issued by the AO u/s 142(1) of the A attention the notice issued by the AO u/s 142(1) of the Act dated 14 ct dated 14-01- 2023 in the course of assessment proceedings conducted u/s 153C of the 2023 in the course of assessment proceedings conducted u/s 153C of the 2023 in the course of assessment proceedings conducted u/s 153C of the Act and pointed out that, the AO had identified the specific seized Act and pointed out that, the AO had identified the specific seized Act and pointed out that, the AO had identified the specific seized material was found from the premises of M/s Crystal Bottles which material was found from the premises of M/s Crystal Bottles which material was found from the premises of M/s Crystal Bottles which contained information relating to th contained information relating to the assessee. The Ld. CIT, DR submitted e assessee. The Ld. CIT, DR submitted that, the AO had also elucidated in that notice, the inference which was that, the AO had also elucidated in that notice, the inference which was that, the AO had also elucidated in that notice, the inference which was sought to be drawn from such seized material against the assessee. She sought to be drawn from such seized material against the assessee. She sought to be drawn from such seized material against the assessee. She further pointed out that, later on, a search action was conducted upon the further pointed out that, later on, a search action was conducted upon the further pointed out that, later on, a search action was conducted upon the assessee on 15-06-2022 when the impugned assessment(s) were pending 2022 when the impugned assessment(s) were pending 2022 when the impugned assessment(s) were pending and that the findings / material seized in the course of direct search on and that the findings / material seized in the course of direct search on and that the findings / material seized in the course of direct search on the assessee corroborated the information unearthed in the course of the assessee corroborated the information unearthed in the course of the assessee corroborated the information unearthed in the course of search at M/s Crystal Bottles. According to search at M/s Crystal Bottles. According to her all these facts considered her all these facts considered to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt cumulatively showed that, there was sufficient seized cumulatively showed that, there was sufficient seized cumulatively showed that, there was sufficient seized material in possession of the AO demonstrating possession of the AO demonstrating impact on the determination of the impact on the determination of the income of the assessee income of the assessee and thus the AO had validly usurped jurisdiction and thus the AO had validly usurped jurisdiction u/s 153C of the Act. She thus vehemently supported the Ld. CIT(A)’s ct. She thus vehemently supported the Ld. CIT(A)’s ct. She thus vehemently supported the Ld. CIT(A)’s order dismissing this legal plea of the assessee. order dismissing this legal plea of the assessee.

mechanical manner without dem mechanical manner without demonstrating any live link between the onstrating any live link between the material seized from the premises of third party with the quantum of material seized from the premises of third party with the quantum of material seized from the premises of third party with the quantum of income alleged to be escaping tax in these AYs. income alleged to be escaping tax in these AYs.

The AO is found to have also referred to specific excel sheets, ledger etc. found to have also referred to specific excel sheets, ledger etc. found to have also referred to specific excel sheets, ledger etc. seized from the premises of M/s Crystal Bottles, which contained seized from the premises of M/s Crystal Bottles, which contained seized from the premises of M/s Crystal Bottles, which contained information relating to the assessee. The AO has also pointed out that, information relating to the assessee. The AO has also pointed out that, information relating to the assessee. The AO has also pointed out that, the key person of M/s Crystal Bottles in his statemen the key person of M/s Crystal Bottles in his statement recorded u/s t recorded u/s 132(4) of the Act had admitted to bogus purchases facilitated for the 132(4) of the Act had admitted to bogus purchases facilitated for the 132(4) of the Act had admitted to bogus purchases facilitated for the assessee. We thus note that, the AO of the assessee has objectively assessee. We thus note that, the AO of the assessee has objectively assessee. We thus note that, the AO of the assessee has objectively analyze and compartmentali e and compartmentalize the incriminating material year e the incriminating material year-wise, as received from the AO of the searc received from the AO of the searched person, and arrive at a categoric arrive at a categoric determination as to the year to which the incriminating material relates determination as to the year to which the incriminating material relates determination as to the year to which the incriminating material relates and issue notices only for those years and issue notices only for those years. In our opinion therefore, the . In our opinion therefore, the satisfaction note recorded by the AO in these AYs meets the requirement satisfaction note recorded by the AO in these AYs meets the requirement satisfaction note recorded by the AO in these AYs meets the requirement laid down by the Hon’ble Supreme Court in the case of d down by the Hon’ble Supreme Court in the case of CIT Vs Singhad CIT Vs Singhad Technical Education Society (supra) Technical Education Society (supra).

According to us, there here is no doubt that the AO was in possession of no doubt that the AO was in possession of material which could have led to no other satisfaction but that of the material which could have led to no other satisfaction but that of the material which could have led to no other satisfaction but that of the material impacting the determination of income of the assessee material impacting the determination of income of the assessee material impacting the determination of income of the assessee. The case laws relied upon by the Ld. AR of the assessee relied upon by the Ld. AR of the assessee are clearly distinguishable are clearly distinguishable on facts, since in the facts of the present case the satisfaction of the AO is on facts, since in the facts of the present case the satisfaction of the AO is on facts, since in the facts of the present case the satisfaction of the AO is evident from the material gathered during search evident from the material gathered during search conducted upon M/s conducted upon M/s Crystal Bottles. In view of the In view of the foregoing, we do not find any merit in the , we do not find any merit in the legal grounds raised by the assessee challenging the validity of grounds raised by the assessee challenging the validity of grounds raised by the assessee challenging the validity of to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt jurisdiction assumed by the AO u/s 153C of the Act jurisdiction assumed by the AO u/s 153C of the Act and therefore dismiss and therefore dismiss the same.

According to the AO, the seized material inter alia contained details of to the AO, the seized material inter alia contained details of to the AO, the seized material inter alia contained details of suppression of income by the assessee by debiting bogus purchases from suppression of income by the assessee by debiting bogus purchases from suppression of income by the assessee by debiting bogus purchases from several vendors of old liquor bottles including M/s Crystal Bottles. several vendors of old liquor bottles including M/s Crystal Bottles. several vendors of old liquor bottles including M/s Crystal Bottles.

Consequent to the completion of direct search, the a Consequent to the completion of direct search, the assessee is found to ssessee is found to have also filed a letter with the AO, in the course of assessment have also filed a letter with the AO, in the course of assessment have also filed a letter with the AO, in the course of assessment proceedings, admitting additional income in the impugned AYs 2018 proceedings, admitting additional income in the impugned AYs 2018 proceedings, admitting additional income in the impugned AYs 2018-19 & 2019-20. It is noted from the assessment order(s) that, the AO had 20. It is noted from the assessment order(s) that, the AO had 20. It is noted from the assessment order(s) that, the AO had initially referred to the materi initially referred to the material which was seized from the premises of al which was seized from the premises of M/s Crystal Bottles at the beginning of the assessment order but M/s Crystal Bottles at the beginning of the assessment order but M/s Crystal Bottles at the beginning of the assessment order but thereafter he primarily based his findings on the material unearthed in the thereafter he primarily based his findings on the material unearthed in the thereafter he primarily based his findings on the material unearthed in the course of direct search upon the assessee, which took place during the course of direct search upon the assessee, which took place during the course of direct search upon the assessee, which took place during the pendency of the assessment proceedings. dency of the assessment proceedings.

13. The AO is noted to have relied upon the contents of a silver color The AO is noted to have relied upon the contents of a silver color The AO is noted to have relied upon the contents of a silver color pen drive seized from the residential premises of Shri S Varatharaj, pen drive seized from the residential premises of Shri S Varatharaj, pen drive seized from the residential premises of Shri S Varatharaj, Deputy Manager of the assessee company which contained an Excel File Deputy Manager of the assessee company which contained an Excel File Deputy Manager of the assessee company which contained an Excel File comprising of several excel sheets titled ‘ENA Schedule’. These excel g of several excel sheets titled ‘ENA Schedule’. These excel g of several excel sheets titled ‘ENA Schedule’. These excel sheets were printed and seized as Annexure ANN/ARS/SAFL/Loose sheets were printed and seized as Annexure ANN/ARS/SAFL/Loose sheets were printed and seized as Annexure ANN/ARS/SAFL/Loose Sheets/S-1, Pages 1 to 66. It is noted that, this 1, Pages 1 to 66. It is noted that, this excel file excel file comprised of five(5) Sheets which comprised of data relating to purchase which comprised of data relating to purchase which comprised of data relating to purchase of old bottles for three-month period in the year 2020 month period in the year 2020. The AO is noted to have . The AO is noted to have tabulated sample data from this excel file in this assessment order. It is tabulated sample data from this excel file in this assessment order. It is tabulated sample data from this excel file in this assessment order. It is to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt :: 14 ::

seen that, this data comprised of month wise details of the old bottles seen that, this data comprised of month wise details of the old bottles seen that, this data comprised of month wise details of the old bottles purchased from certain vendo purchased from certain vendors. It inter alia contained the date of rs. It inter alia contained the date of invoice, manner of payment, date of cheque, invoice amount, GST, other invoice, manner of payment, date of cheque, invoice amount, GST, other invoice, manner of payment, date of cheque, invoice amount, GST, other charges & total. Another excel sheet, is noted to contain date charges & total. Another excel sheet, is noted to contain date charges & total. Another excel sheet, is noted to contain date-wise column-wise notings of several figures against five vendors. According to wise notings of several figures against five vendors. According to wise notings of several figures against five vendors. According to the AO, these excel files were actually a summary of the bogus invoices AO, these excel files were actually a summary of the bogus invoices AO, these excel files were actually a summary of the bogus invoices obtained by the assessee from these vendors inter alia including M/s obtained by the assessee from these vendors inter alia including M/s obtained by the assessee from these vendors inter alia including M/s Crystal Bottles and that the date Crystal Bottles and that the date-wise details were the notings of cash wise details were the notings of cash amounts due from them. It is observed that thi amounts due from them. It is observed that this analogy of the AO was s analogy of the AO was based on the statement(s) obtained from key employees of the assessee based on the statement(s) obtained from key employees of the assessee based on the statement(s) obtained from key employees of the assessee i.e., Shri S Varatharaj [from whose possession the pen drive was found] i.e., Shri S Varatharaj [from whose possession the pen drive was found] i.e., Shri S Varatharaj [from whose possession the pen drive was found] and Shri Austine Paulraj. These employees had explained that, the and Shri Austine Paulraj. These employees had explained that, the and Shri Austine Paulraj. These employees had explained that, the column ‘Others’ in the e column ‘Others’ in the excel file represented the commission retained by xcel file represented the commission retained by the vendors for facilitating bogus invoices and that the column ‘Total’ the vendors for facilitating bogus invoices and that the column ‘Total’ the vendors for facilitating bogus invoices and that the column ‘Total’ denoted the cash which was to be returned back by the vendors against denoted the cash which was to be returned back by the vendors against denoted the cash which was to be returned back by the vendors against the cheques paid to them in lieu of bogus invoices. The AO therea the cheques paid to them in lieu of bogus invoices. The AO therea the cheques paid to them in lieu of bogus invoices. The AO thereafter extracted the data of old extracted the data of old-bottle supplier-wise purchase ledgers from the wise purchase ledgers from the SAP software along with their off SAP software along with their off-set accounts of old bottle purchases. set accounts of old bottle purchases.

According to the AO, these vendors were not only supplying old bottles for According to the AO, these vendors were not only supplying old bottles for According to the AO, these vendors were not only supplying old bottles for which genuine invoices were bei which genuine invoices were being raised, but these same vendors were ng raised, but these same vendors were also providing bogus invoices to facilitate inflation of expenses of the also providing bogus invoices to facilitate inflation of expenses of the also providing bogus invoices to facilitate inflation of expenses of the to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt assessee. This inference was drawn from the purchase ledgers, which assessee. This inference was drawn from the purchase ledgers, which assessee. This inference was drawn from the purchase ledgers, which according to the AO, contained entries both for genuine old bottle according to the AO, contained entries both for genuine old bottle according to the AO, contained entries both for genuine old bottle purchases and bogus old bottle purchases. In the AO’s opinion, the actual and bogus old bottle purchases. In the AO’s opinion, the actual and bogus old bottle purchases. In the AO’s opinion, the actual old bottles purchased were accompanied by GRNs whereas the same was old bottles purchased were accompanied by GRNs whereas the same was old bottles purchased were accompanied by GRNs whereas the same was lacking in old bottle purchases. The AO accordingly deduced that, in case lacking in old bottle purchases. The AO accordingly deduced that, in case lacking in old bottle purchases. The AO accordingly deduced that, in case of bogus purchases, the bills were processed with of bogus purchases, the bills were processed without GRN entry. The AO out GRN entry. The AO thereafter elaborately discussed the accounting processes followed by the thereafter elaborately discussed the accounting processes followed by the thereafter elaborately discussed the accounting processes followed by the assessee upon purchase of old bottles with screenshots of SAP system, assessee upon purchase of old bottles with screenshots of SAP system, assessee upon purchase of old bottles with screenshots of SAP system, invoices in light of the statements obtained from the accounts & audit invoices in light of the statements obtained from the accounts & audit invoices in light of the statements obtained from the accounts & audit staff. The AO inferred that wherever the purchases invoices were bogus, red that wherever the purchases invoices were bogus, red that wherever the purchases invoices were bogus, there was no movement from top to bottom for accounting and payment. there was no movement from top to bottom for accounting and payment. there was no movement from top to bottom for accounting and payment.

According to AO, the assessee would simply collect cash from the old According to AO, the assessee would simply collect cash from the old According to AO, the assessee would simply collect cash from the old bottle suppliers in lieu of payments made towards bogus purchase bottle suppliers in lieu of payments made towards bogus purchase bottle suppliers in lieu of payments made towards bogus purchase invoices after deducting commission retained by these suppliers for invoices after deducting commission retained by these suppliers for invoices after deducting commission retained by these suppliers for facilitating such bogus bills. The AO is noted to have extensively facilitating such bogus bills. The AO is noted to have extensively facilitating such bogus bills. The AO is noted to have extensively reproduced the statements of several employees of the assessee viz., Shri reproduced the statements of several employees of the assessee viz., Shri reproduced the statements of several employees of the assessee viz., Shri S Varatharaj, Shri Austine Paulraj etc., record S Varatharaj, Shri Austine Paulraj etc., recorded across several dates in ed across several dates in the assessment order, wherein they had admitted that, the invoices which the assessment order, wherein they had admitted that, the invoices which the assessment order, wherein they had admitted that, the invoices which did not carry seal or GRN details were bogus purchases. It is observed did not carry seal or GRN details were bogus purchases. It is observed did not carry seal or GRN details were bogus purchases. It is observed that, Shri Austine Paulraj had identified eight (8) regular suppliers that, Shri Austine Paulraj had identified eight (8) regular suppliers that, Shri Austine Paulraj had identified eight (8) regular suppliers including M/s Crystal Bottles who were inter alia providing these bogus rystal Bottles who were inter alia providing these bogus rystal Bottles who were inter alia providing these bogus to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt invoices. According to the employees, the vendors would return back the invoices. According to the employees, the vendors would return back the invoices. According to the employees, the vendors would return back the cash in lieu of the payments made against such bogus invoices after cash in lieu of the payments made against such bogus invoices after cash in lieu of the payments made against such bogus invoices after deducting their commission and that such cash was utilized deducting their commission and that such cash was utilized deducting their commission and that such cash was utilized to meet other cash expenses of the assessee. The AO also reproduced the statement of cash expenses of the assessee. The AO also reproduced the statement of cash expenses of the assessee. The AO also reproduced the statement of the Managing Director of the assessee, Shri M Anand who had confirmed the Managing Director of the assessee, Shri M Anand who had confirmed the Managing Director of the assessee, Shri M Anand who had confirmed the statements given by Shri S Varatharaj & Shri Austine Paulraj. the statements given by Shri S Varatharaj & Shri Austine Paulraj. the statements given by Shri S Varatharaj & Shri Austine Paulraj.

Thereafter, the AO at Para 6 of his Thereafter, the AO at Para 6 of his order elaborately set out the findings order elaborately set out the findings unearthed upon conducting search and examination of these suppliers unearthed upon conducting search and examination of these suppliers unearthed upon conducting search and examination of these suppliers including M/s Crystal Bottles. To sum up, according to the AO, these including M/s Crystal Bottles. To sum up, according to the AO, these including M/s Crystal Bottles. To sum up, according to the AO, these suppliers had also corroborated the statements of the employee(s) that suppliers had also corroborated the statements of the employee(s) that suppliers had also corroborated the statements of the employee(s) that they had facilitated inflation of expenses by providing bogus invoices. The facilitated inflation of expenses by providing bogus invoices. The facilitated inflation of expenses by providing bogus invoices. The AO is thus noted to have added the entire value of the bogus old bottle AO is thus noted to have added the entire value of the bogus old bottle AO is thus noted to have added the entire value of the bogus old bottle purchases, as quantified by him in the Table at Para 8.1.2 of his purchases, as quantified by him in the Table at Para 8.1.2 of his purchases, as quantified by him in the Table at Para 8.1.2 of his assessment order, in both the impugned AYs 2018 assessment order, in both the impugned AYs 2018-19 & 2019 & 2019-20.

14. Aggrieved by the order of the AO, the assessee preferred appeal Aggrieved by the order of the AO, the assessee preferred appeal Aggrieved by the order of the AO, the assessee preferred appeal before the Ld. CIT(A). It is seen that, the Ld. CIT(A) after considering the before the Ld. CIT(A). It is seen that, the Ld. CIT(A) after considering the before the Ld. CIT(A). It is seen that, the Ld. CIT(A) after considering the submissions of the assessee in light of the findings of the AO, had submissions of the assessee in light of the findings of the AO, had submissions of the assessee in light of the findings of the AO, had ultimately rejected the books o ultimately rejected the books of accounts of the assessee and estimated f accounts of the assessee and estimated the profits at 10% of the turnover. Being aggrieved by the order of the the profits at 10% of the turnover. Being aggrieved by the order of the the profits at 10% of the turnover. Being aggrieved by the order of the Ld. CIT(A), both the assessee and Revenue are in appeal before us. Ld. CIT(A), both the assessee and Revenue are in appeal before us. Ld. CIT(A), both the assessee and Revenue are in appeal before us. to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt :: 17 ::

1550-1552 &1817-1819 1819/Chny/2025 for AYs 2020-21 to 2022 21 to 2022-23, we have sustained the Ld. CIT(A)’s order rejecting the books of accounts u/s sustained the Ld. CIT(A)’s order rejecting the books of accounts u/s sustained the Ld. CIT(A)’s order rejecting the books of accounts u/s 145(3) and the action of estimat 145(3) and the action of estimation of profits at 10%, by observing as ion of profits at 10%, by observing as under:-

12. Overall therefore, we are in agreement with the Ld. CIT( Overall therefore, we are in agreement with the Ld. CIT( Overall therefore, we are in agreement with the Ld. CIT(A)

that, there are indeed discrepancies in the books of accounts as rightly that, there are indeed discrepancies in the books of accounts as rightly that, there are indeed discrepancies in the books of accounts as rightly highlighted by the lower authorities, but it cannot be alleged that the highlighted by the lower authorities, but it cannot be alleged that the highlighted by the lower authorities, but it cannot be alleged that the entire value of purchases lacking GRNs, made from these genuine entire value of purchases lacking GRNs, made from these genuine entire value of purchases lacking GRNs, made from these genuine suppliers were bogus. The Ld. AR for the ass suppliers were bogus. The Ld. AR for the assessee has also tacitly essee has also tacitly acknowledged before us that, there were accounting anomalies in acknowledged before us that, there were accounting anomalies in acknowledged before us that, there were accounting anomalies in maintaining the books of accounts, but he contended that, these maintaining the books of accounts, but he contended that, these maintaining the books of accounts, but he contended that, these accounting anomalies cannot be ipso facto assumed to be falsification of accounting anomalies cannot be ipso facto assumed to be falsification of accounting anomalies cannot be ipso facto assumed to be falsification of entries, which requires strict p entries, which requires strict proof of mens-rea, which is absent. He , which is absent. He pointed out that the AO in the assessment order erroneously treated pointed out that the AO in the assessment order erroneously treated pointed out that the AO in the assessment order erroneously treated these accounting deficiencies to tantamount to false entries and thereby these accounting deficiencies to tantamount to false entries and thereby these accounting deficiencies to tantamount to false entries and thereby initiated penal action u/s 271AAD of the Act. At this juncture, it is initiated penal action u/s 271AAD of the Act. At this juncture, it is initiated penal action u/s 271AAD of the Act. At this juncture, it is imperative for us to clarify that the accounting deficiencies seen in the ive for us to clarify that the accounting deficiencies seen in the ive for us to clarify that the accounting deficiencies seen in the to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt books of accounts cannot be equated with falsification of entries in the books of accounts cannot be equated with falsification of entries in the books of accounts cannot be equated with falsification of entries in the books of accounts. In our opinion, in a given case, if corroborated, the books of accounts. In our opinion, in a given case, if corroborated, the books of accounts. In our opinion, in a given case, if corroborated, the statements recorded during the course of th statements recorded during the course of the search can be used to e search can be used to make addition(s) in the hands of the assessee, but it cannot alone be make addition(s) in the hands of the assessee, but it cannot alone be make addition(s) in the hands of the assessee, but it cannot alone be taken as conclusive proof to allege falsification of entries in the books of taken as conclusive proof to allege falsification of entries in the books of taken as conclusive proof to allege falsification of entries in the books of accounts. In our view, the case of falsification of entries sought to be accounts. In our view, the case of falsification of entries sought to be accounts. In our view, the case of falsification of entries sought to be made out by the AO in the assessment order cannot be said to be the AO in the assessment order cannot be said to be the AO in the assessment order cannot be said to be established from the seized records. Hence, it is observed in the given established from the seized records. Hence, it is observed in the given established from the seized records. Hence, it is observed in the given facts discussed supra that such conclusions drawn by the Assessing facts discussed supra that such conclusions drawn by the Assessing facts discussed supra that such conclusions drawn by the Assessing

Officer on falsification of entries in books of accounts is unten Officer on falsification of entries in books of accounts is unten Officer on falsification of entries in books of accounts is untenable.

Having said so, we maintain that, there are deficiencies in the books of Having said so, we maintain that, there are deficiencies in the books of Having said so, we maintain that, there are deficiencies in the books of accounts maintained by the Assessee leading to the difficulties in accounts maintained by the Assessee leading to the difficulties in accounts maintained by the Assessee leading to the difficulties in determining the correct assessable income considering the complex determining the correct assessable income considering the complex determining the correct assessable income considering the complex nature of the business carried out by the as nature of the business carried out by the assessee. We find that this sessee. We find that this similar aspect was considered by the jurisdictional High Court in the similar aspect was considered by the jurisdictional High Court in the similar aspect was considered by the jurisdictional High Court in the case of Empee Distilleries Ltd Vs. ACIT (187 Taxman 188) Empee Distilleries Ltd Vs. ACIT (187 Taxman 188) Empee Distilleries Ltd Vs. ACIT (187 Taxman 188), which was also involved in the same line of business as that of the assessee was also involved in the same line of business as that of the assessee was also involved in the same line of business as that of the assessee and similar allegation wa and similar allegation was levelled in relation to their old bottle s levelled in relation to their old bottle purchases. It is seen that, the Hon’ble High Court had denounced the purchases. It is seen that, the Hon’ble High Court had denounced the purchases. It is seen that, the Hon’ble High Court had denounced the AO’s action of adding the entire value of purchases and instead AO’s action of adding the entire value of purchases and instead AO’s action of adding the entire value of purchases and instead estimated the disallowance at 10%. Following the decision (supra), we estimated the disallowance at 10%. Following the decision (supra), we estimated the disallowance at 10%. Following the decision (supra), we countenance the Ld CIT(A) action to the extent that there were e the Ld CIT(A) action to the extent that there were e the Ld CIT(A) action to the extent that there were accounting deficiencies in the books of accounts viz (i) SAP entries were accounting deficiencies in the books of accounts viz (i) SAP entries were accounting deficiencies in the books of accounts viz (i) SAP entries were not properly handled, (ii) standard accounting procedures were not fully not properly handled, (ii) standard accounting procedures were not fully not properly handled, (ii) standard accounting procedures were not fully followed and (iii) the purchases without GRNs lacked lacked proper to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt documentation, and therefore on these counts sustain the action of the Ld. CIT(A) in documentation, and therefore on these counts sustain the action of the Ld. CIT(A) in documentation, and therefore on these counts sustain the action of the Ld. CIT(A) in rejecting the books of accounts and estimating the profits of the assessee. The relevant rejecting the books of accounts and estimating the profits of the assessee. The relevant rejecting the books of accounts and estimating the profits of the assessee. The relevant findings of Ld.CIT(A) as partly countenanced by us supra, a findings of Ld.CIT(A) as partly countenanced by us supra, are as under: re as under:-

“6.2.19 During the course of the appellate proceedings, the AR, along with During the course of the appellate proceedings, the AR, along with During the course of the appellate proceedings, the AR, along with the representatives of the appellant company, provided an explanation of the the representatives of the appellant company, provided an explanation of the the representatives of the appellant company, provided an explanation of the actual events and the accounting process related to the purchase of old bottles actual events and the accounting process related to the purchase of old bottles actual events and the accounting process related to the purchase of old bottles from the vendors. The old bottles are purchased routinely in the regular course vendors. The old bottles are purchased routinely in the regular course vendors. The old bottles are purchased routinely in the regular course of business. The use of these bottle undergo reconditioning for reuse, involves of business. The use of these bottle undergo reconditioning for reuse, involves of business. The use of these bottle undergo reconditioning for reuse, involves several steps to ensure that the bottles meet industry standards for hygiene, several steps to ensure that the bottles meet industry standards for hygiene, several steps to ensure that the bottles meet industry standards for hygiene, safety, and regulatory com safety, and regulatory compliance. The bottles are sorted to separate those that pliance. The bottles are sorted to separate those that are still in good condition from those that are damaged and cannot be reused. are still in good condition from those that are damaged and cannot be reused. are still in good condition from those that are damaged and cannot be reused. The bottles undergo an inspection process to assess their condition. Bottles with The bottles undergo an inspection process to assess their condition. Bottles with The bottles undergo an inspection process to assess their condition. Bottles with cracks, chips, or other defects are disca cracks, chips, or other defects are discarded. Bottles that pass the inspection are rded. Bottles that pass the inspection are cleaned and sanitized before re cleaned and sanitized before re-use. This ensures that there are no foreign use. This ensures that there are no foreign substances or contamination inside the bottles. substances or contamination inside the bottles. The bottles are washed to The bottles are washed to remove any remaining liquids, labels, or external dirt. This is remove any remaining liquids, labels, or external dirt. This is remove any remaining liquids, labels, or external dirt. This is usually done through a mechanical washing process. The bottles are then sanitized to through a mechanical washing process. The bottles are then sanitized to through a mechanical washing process. The bottles are then sanitized to remove any bacteria or contaminants. This is typically done using high remove any bacteria or contaminants. This is typically done using high remove any bacteria or contaminants. This is typically done using high-pressure water, steam, or chemical sanitizers that are safe for food water, steam, or chemical sanitizers that are safe for food-grade packaging. grade packaging. After cleaning and sanitizing, the bottles are thoroughly dried to avoid any ing and sanitizing, the bottles are thoroughly dried to avoid any ing and sanitizing, the bottles are thoroughly dried to avoid any moisture retention that could affect the new contents. moisture retention that could affect the new contents.

6.2.20 In this process, there are instances where the bottles, being fragile, In this process, there are instances where the bottles, being fragile, In this process, there are instances where the bottles, being fragile, break, resulting in a significant reduction in the numb break, resulting in a significant reduction in the number of bottles available for er of bottles available for refilling. This, in turn, impacts the overall production estimates. In such refilling. This, in turn, impacts the overall production estimates. In such refilling. This, in turn, impacts the overall production estimates. In such situations, to meet the marketing demand, the appellant company is compelled situations, to meet the marketing demand, the appellant company is compelled situations, to meet the marketing demand, the appellant company is compelled to replace the rejected bottles by sourcing additional old bottles from the to replace the rejected bottles by sourcing additional old bottles from the to replace the rejected bottles by sourcing additional old bottles from their vendors on emergency situations. This was done by overlooking the usual vendors on emergency situations. This was done by overlooking the usual vendors on emergency situations. This was done by overlooking the usual purchase procedures to fulfil the daily production requirements. In view of this purchase procedures to fulfil the daily production requirements. In view of this purchase procedures to fulfil the daily production requirements. In view of this recurrent event happening in this line of business, the AR has contended that recurrent event happening in this line of business, the AR has contended that recurrent event happening in this line of business, the AR has contended that emergency purchases ef emergency purchases effected by the appellant company was only to meet its fected by the appellant company was only to meet its business requirements. Therefore, it has been claimed that these kinds of business requirements. Therefore, it has been claimed that these kinds of business requirements. Therefore, it has been claimed that these kinds of purchases cannot be termed as “bogus” and further claimed that the purchases cannot be termed as “bogus” and further claimed that the purchases cannot be termed as “bogus” and further claimed that the disallowance of Rs. 3,13,75,315/ Rs. 3,13,75,315/- & Rs. 37,97,84,300/- for the AY 2020 AY 2020-21 and Rs.56,41,82,236/- & Rs. 58,23,45,992/-for the AY(s) 2021-22 & 2022 22 & 2022-23 in the hands of the appellant company hands of the appellant company is not justified. Further, the AR stated that, the is not justified. Further, the AR stated that, the alleged Old Bottle purchases were properly debited to stock account and issues alleged Old Bottle purchases were properly debited to stock account and issues alleged Old Bottle purchases were properly debited to stock account and issues for production were credited. Also, the AR stated that, the bottles that were said for production were credited. Also, the AR stated that, the bottles that were said for production were credited. Also, the AR stated that, the bottles that were said to be bogus were also consumed in productio to be bogus were also consumed in production. Further, the AR submitted that n. Further, the AR submitted that even though the bottles were purchased without following the regular even though the bottles were purchased without following the regular even though the bottles were purchased without following the regular procedures which are said to be bogus, whereas in reality, these were consumed procedures which are said to be bogus, whereas in reality, these were consumed procedures which are said to be bogus, whereas in reality, these were consumed in production requiring no disallowance. in production requiring no disallowance.

6.2.21 The undersigned has caref The undersigned has carefully considered the written submission, ully considered the written submission, supporting documents and arguments advanced by the AR during the course of supporting documents and arguments advanced by the AR during the course of supporting documents and arguments advanced by the AR during the course of to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt appellate proceedings, with respect to the process involved in the bottle appellate proceedings, with respect to the process involved in the bottle appellate proceedings, with respect to the process involved in the bottle purchase in the regular course as well as sourced on emergency basi purchase in the regular course as well as sourced on emergency basi purchase in the regular course as well as sourced on emergency basis. As seen from the documents presented before the undersigned that the purchase of from the documents presented before the undersigned that the purchase of from the documents presented before the undersigned that the purchase of bottles either following the normal process or sourced on emergency basis bottles either following the normal process or sourced on emergency basis bottles either following the normal process or sourced on emergency basis without GRN, both were reflected as debit entry in stock in the SAP Software, without GRN, both were reflected as debit entry in stock in the SAP Software, without GRN, both were reflected as debit entry in stock in the SAP Software, although it was a ma although it was a manual entry in the SAP software in the case of bottles nual entry in the SAP software in the case of bottles purchased without GRN numbers. The appellant’s contention is that the stock purchased without GRN numbers. The appellant’s contention is that the stock purchased without GRN numbers. The appellant’s contention is that the stock debits were made for both kind of purchases in the SAP, evidences that the debits were made for both kind of purchases in the SAP, evidences that the debits were made for both kind of purchases in the SAP, evidences that the same were consumed in the production and hence cann same were consumed in the production and hence cannot be rejected in toto. On ot be rejected in toto. On the other hand, there seems to be accounting anomalies in as much as the other hand, there seems to be accounting anomalies in as much as the other hand, there seems to be accounting anomalies in as much as classification of incorrect offset account such as “Stock_PackMtrl Bottle”, classification of incorrect offset account such as “Stock_PackMtrl Bottle”, classification of incorrect offset account such as “Stock_PackMtrl Bottle”, “Consumption-Bottles" and "Cost of Goods Sold Bottles" and "Cost of Goods Sold-FG," On observing these FG," On observing these accounting anomalies, it can be reasonable construed that the books does not omalies, it can be reasonable construed that the books does not omalies, it can be reasonable construed that the books does not reflect the true affairs of the appellant company. reflect the true affairs of the appellant company.

6.2.22 Further, t Further, the undersigned observes that neither the Investigation he undersigned observes that neither the Investigation Officer nor the AO has made any specific findings that the appellant Officer nor the AO has made any specific findings that the appellant Officer nor the AO has made any specific findings that the appellant company has utilised the unaccounted income generated through alleged bogus purchases has utilised the unaccounted income generated through alleged bogus purchases has utilised the unaccounted income generated through alleged bogus purchases of old bottles in the form of unaccounted application of such income. During the of old bottles in the form of unaccounted application of such income. During the of old bottles in the form of unaccounted application of such income. During the course of the search conducted in the case of the appellant company and all course of the search conducted in the case of the appellant company and all course of the search conducted in the case of the appellant company and all other connected entities including the Managing Director and other key persons ted entities including the Managing Director and other key persons ted entities including the Managing Director and other key persons who were also subjected to search, the search team quantified an approximate who were also subjected to search, the search team quantified an approximate who were also subjected to search, the search team quantified an approximate amount of Rs. 392 Crores as bogus purchases made by the appellant during the amount of Rs. 392 Crores as bogus purchases made by the appellant during the amount of Rs. 392 Crores as bogus purchases made by the appellant during the FY(s) 2012-13 to 2022 13 to 2022-23. It is significant to bring on record that neither the nificant to bring on record that neither the Investigation officer nor the AO were able to identify the corresponding Investigation officer nor the AO were able to identify the corresponding Investigation officer nor the AO were able to identify the corresponding application of the quantified bogus purchases in the form of any unaccounted application of the quantified bogus purchases in the form of any unaccounted application of the quantified bogus purchases in the form of any unaccounted asset or unaccounted expenditure or unaccounted investments. asset or unaccounted expenditure or unaccounted investments. As evident in the As evident in the assessment order, the AO has treated the purchases being held as bogus and assessment order, the AO has treated the purchases being held as bogus and assessment order, the AO has treated the purchases being held as bogus and disallowed the same. As per the discussion made supra, the appellant was able disallowed the same. As per the discussion made supra, the appellant was able disallowed the same. As per the discussion made supra, the appellant was able to demonstrate the necessity to purchase old bottles by overlooking the regular to demonstrate the necessity to purchase old bottles by overlooking the regular to demonstrate the necessity to purchase old bottles by overlooking the regular purchase procedures. Therefore, the purchases made by overlooking the regular ase procedures. Therefore, the purchases made by overlooking the regular ase procedures. Therefore, the purchases made by overlooking the regular procedure also requires to be regularised. As per the evidences found, it cannot procedure also requires to be regularised. As per the evidences found, it cannot procedure also requires to be regularised. As per the evidences found, it cannot be ruled out that, there existed purchases not utilised for business purposes too. be ruled out that, there existed purchases not utilised for business purposes too. be ruled out that, there existed purchases not utilised for business purposes too.

6.2.23 As eviden As evident in the order passed by the AO, it can be seen that the AO t in the order passed by the AO, it can be seen that the AO treated the amount(s) treated the amount(s) of Rs. 3, 13,75,315/- & Rs. 37,97,84,300/ & Rs. 37,97,84,300/- for the AY 2020-21 and Rs.56,41,82,236/ 21 and Rs.56,41,82,236/- & Rs. 58,23,45,992/-for the AY(s) 2021 for the AY(s) 2021-22 & 2022-23 being the bogus purchases as income of being the bogus purchases as income of the appellant. The AR the appellant. The AR contended that if the disallowance of alleged bogus purchases made by the AO contended that if the disallowance of alleged bogus purchases made by the AO contended that if the disallowance of alleged bogus purchases made by the AO is considered, the resultant net profit would be an unreasonable net profit which is considered, the resultant net profit would be an unreasonable net profit which is considered, the resultant net profit would be an unreasonable net profit which cannot be achieved in the kind of business of the appellant company. The cannot be achieved in the kind of business of the appellant company. The cannot be achieved in the kind of business of the appellant company. The AR has drawn the attention of the undersigned to the fact that the appellant has drawn the attention of the undersigned to the fact that the appellant has drawn the attention of the undersigned to the fact that the appellant company had already admitted a higher net profit by comparing with companies company had already admitted a higher net profit by comparing with companies company had already admitted a higher net profit by comparing with companies in the same line of business. in the same line of business.

6.2.24 The undersigned on account of the detailed discussion made supr The undersigned on account of the detailed discussion made supr The undersigned on account of the detailed discussion made supra, is of the view that as the actual profits cannot be reliably determined due to these of the view that as the actual profits cannot be reliably determined due to these of the view that as the actual profits cannot be reliably determined due to these discrepancies in the books, the discrepancies in the books, the taxable income cannot be accurately determined taxable income cannot be accurately determined based on the current books of accounts. The non based on the current books of accounts. The non-compliance with basic compliance with basic to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt accounting norms, s accounting norms, such as proper documentation and accurate entry of invoices, uch as proper documentation and accurate entry of invoices, further substantiates the claim that the further substantiates the claim that the books do not reflect true income books do not reflect true income. Therefore, the books of accounts in this case should indeed be Therefore, the books of accounts in this case should indeed be rejected under rejected under Section 145(3) for the following reasons: for the following reasons:

 Inconsistent accounting treatments nconsistent accounting treatments, such as the use of incorrect offset , such as the use of incorrect offset accounts for bogus transactions. accounts for bogus transactions.  Handling of SAP entries Handling of SAP entries to process invoices without valid supporting to process invoices without valid supporting documentation (e.g., missing GRN, no purchase orders). documentation (e.g., missing GRN, no purchase orders).  Failure to comply with stand Failure to comply with standard accounting procedures for genuine purchases.  The inability to substantiate purchases with proper documentation The inability to substantiate purchases with proper documentation The inability to substantiate purchases with proper documentation, which significantly impacts the reliability of the accounts. significantly impacts the reliability of the accounts.

6.2.25 Based on the above factors, the undersigned holds that the current Based on the above factors, the undersigned holds that the current Based on the above factors, the undersigned holds that the current books of accounts cannot be considered reliable of accounts cannot be considered reliable for determining the true taxable for determining the true taxable income for the relevant assessment years. Therefore, as per the provisions of income for the relevant assessment years. Therefore, as per the provisions of income for the relevant assessment years. Therefore, as per the provisions of section 145(3) of the Act, the undersigned has the authority to section 145(3) of the Act, the undersigned has the authority to section 145(3) of the Act, the undersigned has the authority to reject these books of accounts books of accounts and determine the taxable income to ascertain the true ermine the taxable income to ascertain the true taxable income of the appellant company for the year under consideration. taxable income of the appellant company for the year under consideration. taxable income of the appellant company for the year under consideration. The undersigned, in order to set right the issues related in determination of the undersigned, in order to set right the issues related in determination of the undersigned, in order to set right the issues related in determination of the profit element embedded in such purchases rejects th profit element embedded in such purchases rejects the books of accounts in e books of accounts in accordance to section 145(3) of the Act. accordance to section 145(3) of the Act.

6.2.26 At this juncture it is appropriate to rely upon the decisions rendered At this juncture it is appropriate to rely upon the decisions rendered At this juncture it is appropriate to rely upon the decisions rendered by the Hon’ble Allahabad High Court in the case of by the Hon’ble Allahabad High Court in the case of Shri Venkteshwar Sugar Mills Shri Venkteshwar Sugar Mills v. CIT(A) (2012) 341 ITR 588 (All v. CIT(A) (2012) 341 ITR 588 (All) wherein the Hon’ble High Court has wherein the Hon’ble High Court has concurred with the decision of the ITAT in upholding the rejection of books of concurred with the decision of the ITAT in upholding the rejection of books of concurred with the decision of the ITAT in upholding the rejection of books of account maintained by the assessee when the same are not properly account maintained by the assessee when the same are not properly account maintained by the assessee when the same are not properly maintained. The relevant para of the judgment is extracted below for ready maintained. The relevant para of the judgment is extracted below for ready maintained. The relevant para of the judgment is extracted below for ready reference:

“12. For the assessment year under consideration, the assessee has shown the For the assessment year under consideration, the assessee has shown the For the assessment year under consideration, the assessee has shown the G.P. rate 16.20 per cent. as against 33.44 per cent. in the previous assessment G.P. rate 16.20 per cent. as against 33.44 per cent. in the previous assessment G.P. rate 16.20 per cent. as against 33.44 per cent. in the previous assessment year. Thus, during the assessment year under consideration, the G.P. rate was year. Thus, during the assessment year under consideration, the G.P. rate was year. Thus, during the assessment year under consideration, the G.P. rate was low. The Commissioner of Income Commissioner of Income-tax (Appeals) discussed the facts and tax (Appeals) discussed the facts and circumstances pertaining to the manufacturing cost and selling price. The circumstances pertaining to the manufacturing cost and selling price. The circumstances pertaining to the manufacturing cost and selling price. The Assessing Officer has taken the G.P. rate at 27 per cent. on the estimated sale, Assessing Officer has taken the G.P. rate at 27 per cent. on the estimated sale, Assessing Officer has taken the G.P. rate at 27 per cent. on the estimated sale, which is lower in comparison to earlier which is lower in comparison to earlier year i.e. 33.44 per cent. When the books year i.e. 33.44 per cent. When the books of account were not properly maintained and the vouchers pertaining to the of account were not properly maintained and the vouchers pertaining to the of account were not properly maintained and the vouchers pertaining to the consumable items were not available for verification, then we find justification consumable items were not available for verification, then we find justification consumable items were not available for verification, then we find justification for rejection of the books of accounts by the Assessing Off for rejection of the books of accounts by the Assessing Officer Once the books of icer Once the books of account rejected, then there is no option before the Assessing Officer except to account rejected, then there is no option before the Assessing Officer except to account rejected, then there is no option before the Assessing Officer except to estimate the sale and G. P. rate which he determined by taking by comparative estimate the sale and G. P. rate which he determined by taking by comparative estimate the sale and G. P. rate which he determined by taking by comparative figure of the assessee for the previous assessment year. The Tribunal has figure of the assessee for the previous assessment year. The Tribunal has figure of the assessee for the previous assessment year. The Tribunal has already given the partial relief and in the facts and circumstances of the case, already given the partial relief and in the facts and circumstances of the case, already given the partial relief and in the facts and circumstances of the case, there is no scope to give any further relief specially when the estimation is a there is no scope to give any further relief specially when the estimation is a there is no scope to give any further relief specially when the estimation is a question of fact. The Tribunal is a final fact finding authority as per the ratio laid question of fact. The Tribunal is a final fact finding authority as per the ratio laid question of fact. The Tribunal is a final fact finding authority as per the ratio laid to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt down in the case of the case of Kamala Ganapathy Subramaniam v. Collector of Estate Collector of Estate Duty [2002] 253 ITR ITR 692/121 Taxman 615 (SC) .

13. In the instant case, the addition is made on the estimate basis, which is a In the instant case, the addition is made on the estimate basis, which is a In the instant case, the addition is made on the estimate basis, which is a question of fact as per the question of fact as per the ratio laid down in the case of ratio laid down in the case of Utkal Road Lines v. Registrar, ITAT Registrar, ITAT [2011] 336 ITR 149 (Orissa) , wherein it was observed 149 (Orissa) , wherein it was observed that the application of G.P. rate on estimate basis is a question of fact. The that the application of G.P. rate on estimate basis is a question of fact. The that the application of G.P. rate on estimate basis is a question of fact. The hon'ble Supreme Court in the case of hon'ble Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. Chemicals Co. Ltd . [2003] 261 ITR ITR 275/130 Taxman 179 (SC) observed that valuation of raw observed that valuation of raw material for the purpose of tax on estimate basis is a question of fact. Similar material for the purpose of tax on estimate basis is a question of fact. Similar material for the purpose of tax on estimate basis is a question of fact. Similar views were expressed in the following cases : views were expressed in the following cases : ….

6.2.27 Further the Hon’ble Punjab & Haryana High Court in the case of her the Hon’ble Punjab & Haryana High Court in the case of her the Hon’ble Punjab & Haryana High Court in the case of Mahavir Rice Mills v. CIT (2023) 153 taxmann.com 686 (P&H) Rice Mills v. CIT (2023) 153 taxmann.com 686 (P&H) has upheld the estimation has upheld the estimation made, by rejecting the books of account of the assessee in the absence of made, by rejecting the books of account of the assessee in the absence of made, by rejecting the books of account of the assessee in the absence of details of stock. The relevant para of details of stock. The relevant para of the judgment is extracted below for ready the judgment is extracted below for ready reference:

“9. As per above Section, the income has to be computed in accordance with the As per above Section, the income has to be computed in accordance with the As per above Section, the income has to be computed in accordance with the method of accountancy followed by an assessee method of accountancy followed by an assessee i.e. cash or mercantile. Such cash or mercantile. Such method has to be followed keeping in view the method has to be followed keeping in view the accounting standard notified by accounting standard notified by the Central Government from time to time. In the absence of qualitative details, the Central Government from time to time. In the absence of qualitative details, the Central Government from time to time. In the absence of qualitative details, it is quite difficult to examine the sales of the assessee. The higher quality of it is quite difficult to examine the sales of the assessee. The higher quality of it is quite difficult to examine the sales of the assessee. The higher quality of a rice can be shown as sold at a lower rate in the bills. The can be shown as sold at a lower rate in the bills. There was flaw in the re was flaw in the maintenance of the details. Thus, the addition of Rs. 2,00,000/ maintenance of the details. Thus, the addition of Rs. 2,00,000/- on account of sale of rice has rightly been made. has rightly been made.

10. Thus, order dated 28 Thus, order dated 28-3-2013 (A-3) passed by Income- -tax Appellate Tribunal, Chandigarh Bench 'F does not require any i Tribunal, Chandigarh Bench 'F does not require any interference by this Court.” nterference by this Court.”

6.2.28 In addition the Hon’ble Calcutta High Court in the case of In addition the Hon’ble Calcutta High Court in the case of In addition the Hon’ble Calcutta High Court in the case of Amiya Kumar Roy v. CIT (1994) 206 ITR 306 (Cal) Kumar Roy v. CIT (1994) 206 ITR 306 (Cal) has held that non maintenance of has held that non maintenance of stock accounts is a substantial defect justifying an inference that the account stock accounts is a substantial defect justifying an inference that the account stock accounts is a substantial defect justifying an inference that the accounts were maintained in a manner from which the true and correct profits were not were maintained in a manner from which the true and correct profits were not were maintained in a manner from which the true and correct profits were not deducible. Relevant para of the judgment is extracted below for ready reference: deducible. Relevant para of the judgment is extracted below for ready reference: deducible. Relevant para of the judgment is extracted below for ready reference:

“We would have been impressed with the contentions if the assessee had “We would have been impressed with the contentions if the assessee had “We would have been impressed with the contentions if the assessee had maintained the stock boo maintained the stock book showing stock tally. In that case, the accounts being k showing stock tally. In that case, the accounts being fool proof, no addition could be warranted. There are certain trades, specially in fool proof, no addition could be warranted. There are certain trades, specially in fool proof, no addition could be warranted. There are certain trades, specially in the retail market, where stock tally may be impracticable and the assessee can the retail market, where stock tally may be impracticable and the assessee can the retail market, where stock tally may be impracticable and the assessee can reasonably advance the plea that the a reasonably advance the plea that the accounts have been maintained in the best ccounts have been maintained in the best manner possible in the special circumstances of the case. But such is not the manner possible in the special circumstances of the case. But such is not the manner possible in the special circumstances of the case. But such is not the case with the assessee. The assessee deals in wholesale spices. Failure to case with the assessee. The assessee deals in wholesale spices. Failure to case with the assessee. The assessee deals in wholesale spices. Failure to to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt maintain stock accounts is a substantial defect in the account maintain stock accounts is a substantial defect in the accounts justifying an s justifying an inference that the accounts are maintained in a manner from which the true and inference that the accounts are maintained in a manner from which the true and inference that the accounts are maintained in a manner from which the true and correct profits are not deducible. Nor is it contended at any stage that the gross correct profits are not deducible. Nor is it contended at any stage that the gross correct profits are not deducible. Nor is it contended at any stage that the gross profit rate shown is the market norm. profit rate shown is the market norm.

Therefore, in our view, the Tribunal wa Therefore, in our view, the Tribunal was right in holding that the estimate which s right in holding that the estimate which was made in the case and the addition made on such estimate was quite was made in the case and the addition made on such estimate was quite was made in the case and the addition made on such estimate was quite reasonable and fair taking a cumulative view of all the factors the case presents. reasonable and fair taking a cumulative view of all the factors the case presents. reasonable and fair taking a cumulative view of all the factors the case presents. Moreover, the Tribunal's finding that the assessee's rate of Moreover, the Tribunal's finding that the assessee's rate of gross profit is below gross profit is below the market rate which is ten per cent. is a finding of fact which the assessee has the market rate which is ten per cent. is a finding of fact which the assessee has the market rate which is ten per cent. is a finding of fact which the assessee has not challenged.”

6.2.29 The Hon’ble jurisdictional High Court has held in the case of CIT v. The Hon’ble jurisdictional High Court has held in the case of CIT v. The Hon’ble jurisdictional High Court has held in the case of CIT v. Marg Ltd. [2017] 84 taxmann.com 52 (Madras) has held that Ltd. [2017] 84 taxmann.com 52 (Madras) has held that Ltd. [2017] 84 taxmann.com 52 (Madras) has held that the AO's disallowance of expenses was not justified without rejecting the books of disallowance of expenses was not justified without rejecting the books of disallowance of expenses was not justified without rejecting the books of accounts under Section 145(3). accounts under Section 145(3).

6.2.30 The jurisdictional tribunal vide its order in he jurisdictional tribunal vide its order in he jurisdictional tribunal vide its order in dated 09.08.2023 has upheld the decision of the Commissioner of Income Tax .2023 has upheld the decision of the Commissioner of Income Tax .2023 has upheld the decision of the Commissioner of Income Tax (Appeal) in rejecting the books of accounts in the case of M/s. Beach Mineraals (Appeal) in rejecting the books of accounts in the case of M/s. Beach Mineraals (Appeal) in rejecting the books of accounts in the case of M/s. Beach Mineraals Company. The ratio of the above judgments are squarely applicable to the facts The ratio of the above judgments are squarely applicable to the facts The ratio of the above judgments are squarely applicable to the facts of the Appellant’s case.” of the Appellant’s case.”

figure between the parties and therefore in our thoughtful consideration, it would figure between the parties and therefore in our thoughtful consideration, it would figure between the parties and therefore in our thoughtful consideration, it would be suitable to adopt and apply reasonable profit ratio to the turnover reported in e to adopt and apply reasonable profit ratio to the turnover reported in e to adopt and apply reasonable profit ratio to the turnover reported in the audited financials for arriving at the assessable income of the assessee. For the audited financials for arriving at the assessable income of the assessee. For the audited financials for arriving at the assessable income of the assessee. For this, the Ld. AR urged us to consider the comparative analysis of other similarly this, the Ld. AR urged us to consider the comparative analysis of other similarly this, the Ld. AR urged us to consider the comparative analysis of other similarly placed entities and also the average profits earned by the assessee itself in the also the average profits earned by the assessee itself in the also the average profits earned by the assessee itself in the comparable years. It is seen that, similarly placed entities such as KALS Distilleries comparable years. It is seen that, similarly placed entities such as KALS Distilleries comparable years. It is seen that, similarly placed entities such as KALS Distilleries

Ltd, Enrica Enterprises Pvt Ltd, Shiva Tillers Pvt Ltd had reported net profit margins Ltd, Enrica Enterprises Pvt Ltd, Shiva Tillers Pvt Ltd had reported net profit margins Ltd, Enrica Enterprises Pvt Ltd, Shiva Tillers Pvt Ltd had reported net profit margins in the range of 1% to 6% and the profits reported by the assessee ranged between to 6% and the profits reported by the assessee ranged between to 6% and the profits reported by the assessee ranged between

AYs 2019-20 to 2022-23 ranged from 5.38% to 7.69%. The Ld. AR further pleaded 23 ranged from 5.38% to 7.69%. The Ld. AR further pleaded 23 ranged from 5.38% to 7.69%. The Ld. AR further pleaded that, there was a significant reduction in profit margins in this industry on account that, there was a significant reduction in profit margins in this industry on account that, there was a significant reduction in profit margins in this industry on account to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt of the nationwide lockdown imp of the nationwide lockdown imposed during the breakout of COVID pandemic which osed during the breakout of COVID pandemic which affected both the production as well as sales reduction in the prices of IMFL (Indian affected both the production as well as sales reduction in the prices of IMFL (Indian affected both the production as well as sales reduction in the prices of IMFL (Indian

Made Foreign Liquor) by the purchasing agency, TASMAC, and therefore wants us Made Foreign Liquor) by the purchasing agency, TASMAC, and therefore wants us Made Foreign Liquor) by the purchasing agency, TASMAC, and therefore wants us to estimate the profits at 8% of the turnov to estimate the profits at 8% of the turnover. We find that, the Ld. CIT(A) had er. We find that, the Ld. CIT(A) had examined the foregoing figures & data along with the contentions of the assessee examined the foregoing figures & data along with the contentions of the assessee examined the foregoing figures & data along with the contentions of the assessee and having regard to the decision of jurisdictional High Court in the case of and having regard to the decision of jurisdictional High Court in the case of and having regard to the decision of jurisdictional High Court in the case of Empee

Distilleries Ltd Vs. ACIT (supra), Distilleries Ltd Vs. ACIT (supra), he had estimated the profit at 10%. The e profit at 10%. The relevant findings of the Ld. CIT(A) are noted to be as under: relevant findings of the Ld. CIT(A) are noted to be as under:-

“6.2.31 Now, after having rejected the books of accounts, Now, after having rejected the books of accounts, the issue before the the issue before the undersigned is, the next question that arise is what will be the profits that can , the next question that arise is what will be the profits that can , the next question that arise is what will be the profits that can be attributable as income of the appellant company for the purpose of taxation utable as income of the appellant company for the purpose of taxation utable as income of the appellant company for the purpose of taxation with respect to the disallowance of bogus expenses relating the purchase of old with respect to the disallowance of bogus expenses relating the purchase of old with respect to the disallowance of bogus expenses relating the purchase of old bottles.

6.2.32 At this juncture, it is significant to rely upon the decision of the At this juncture, it is significant to rely upon the decision of the At this juncture, it is significant to rely upon the decision of the jurisdictional tribunal in the case of tribunal in the case of ACIT Central Circle -1(2) Vs. M/s. Empee 1(2) Vs. M/s. Empee Distilleries Ltd (a company that is in the same line of business as that of the (a company that is in the same line of business as that of the (a company that is in the same line of business as that of the appellant appellant company) company) vide vide its its order order in in ITA ITA No. No. 506, 506, 507, 507, 627, 627, 628,686,629,684,630, 688/Mds/2007 dated 29.08.2008 628,686,629,684,630, 688/Mds/2007 dated 29.08.2008 wherein the Hon’ble wherein the Hon’ble ITAT Chennai has held as under. ITAT Chennai has held as under.

“Next, we will consider the appeals of the Revenue and the assessee for the Next, we will consider the appeals of the Revenue and the assessee for the Next, we will consider the appeals of the Revenue and the assessee for the assessment year 1999 assessment year 1999-2000 in and in and I.T.A. No. 628/Mds/2007 respectively. Similar to the assessment year 628/Mds/2007 respectively. Similar to the assessment year 628/Mds/2007 respectively. Similar to the assessment year 1998-99, the common issue raised by the Revenue as well as by the assessee for the common issue raised by the Revenue as well as by the assessee for the common issue raised by the Revenue as well as by the assessee for the impugned assessment year 1999 impugned assessment year 1999-2000 is the addition made and sustained 2000 is the addition made and sustained against the purchase of old bottles. The Assessing Officer has made a against the purchase of old bottles. The Assessing Officer has made a against the purchase of old bottles. The Assessing Officer has made a disallowance and addition of Rs.3 disallowance and addition of Rs.3,58,19,987/- which is modified to Rs which is modified to Rs 85,41,680/- by by by the the the CIT(Appeals). CIT(Appeals). CIT(Appeals). The The The CIT(Appeals) CIT(Appeals) CIT(Appeals) has has has modified modified modified disallowance to 10% of the purchase of old bottles, as done for earlier disallowance to 10% of the purchase of old bottles, as done for earlier disallowance to 10% of the purchase of old bottles, as done for earlier assessment year 1998 assessment year 1998-99. The issue is discussed by the IN COME Assessing 99. The issue is discussed by the IN COME Assessing Officer in para 5 of his order. The facts and circumstances relating to the para 5 of his order. The facts and circumstances relating to the para 5 of his order. The facts and circumstances relating to the issue are just the same considered for the earlier assessment year 1998 issue are just the same considered for the earlier assessment year 1998 issue are just the same considered for the earlier assessment year 1998-99. On a careful consideration of the issue, we have upheld the order of the On a careful consideration of the issue, we have upheld the order of the On a careful consideration of the issue, we have upheld the order of the CIT(Appeals) for the preceding assessment CIT(Appeals) for the preceding assessment year 1998-99, thereby confirming 99, thereby confirming the disallowance of 10%. Following our findings and order for the said earlier the disallowance of 10%. Following our findings and order for the said earlier the disallowance of 10%. Following our findings and order for the said earlier assessment year, we uphold the decision of CIT (Appeals) on the point and assessment year, we uphold the decision of CIT (Appeals) on the point and assessment year, we uphold the decision of CIT (Appeals) on the point and reject the grounds raised by the Revenue as well as by the assessee reject the grounds raised by the Revenue as well as by the assessee reject the grounds raised by the Revenue as well as by the assessee”.

6.2.33 Further, the Hon’ble Madras High Court in the above case Further, the Hon’ble Madras High Court in the above case Further, the Hon’ble Madras High Court in the above case M/s. Empee Distilleries Ltd Vs. ACIT, Central Circle1(2) [2010]187 Taxman 188 Empee Distilleries Ltd Vs. ACIT, Central Circle1(2) [2010]187 Taxman 188 Empee Distilleries Ltd Vs. ACIT, Central Circle1(2) [2010]187 Taxman 188 (Madras) has held as under with respect to the inflation of purchase expenditure has held as under with respect to the inflation of purchase expenditure has held as under with respect to the inflation of purchase expenditure as under. to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt :: 25 ::

“In respect of the fi “In respect of the first question, the inflation of the purchase expenditure of rst question, the inflation of the purchase expenditure of the old bottles, though for the sake of claim the relief was disputed before the old bottles, though for the sake of claim the relief was disputed before the old bottles, though for the sake of claim the relief was disputed before the authorities, yet the fact remained that such huge inflation had been the authorities, yet the fact remained that such huge inflation had been the authorities, yet the fact remained that such huge inflation had been accepted by the managing director of the compan accepted by the managing director of the company, who offered a sum of Rs. y, who offered a sum of Rs. 74.50 lakhs for taxation. It was also proved by the authorities below that a 74.50 lakhs for taxation. It was also proved by the authorities below that a 74.50 lakhs for taxation. It was also proved by the authorities below that a very huge purchase of old bottles had been made by the assessee through its very huge purchase of old bottles had been made by the assessee through its very huge purchase of old bottles had been made by the assessee through its employees. However, when questioned the employees had categorically employees. However, when questioned the employees had categorically employees. However, when questioned the employees had categorically admitted before the authorities that they were forced to sign on the dotted d before the authorities that they were forced to sign on the dotted d before the authorities that they were forced to sign on the dotted lines and, as such, there was no proof for such huge purchase forthcoming lines and, as such, there was no proof for such huge purchase forthcoming lines and, as such, there was no proof for such huge purchase forthcoming from the assessee. The proof adduced had been rejected as stated above. from the assessee. The proof adduced had been rejected as stated above. from the assessee. The proof adduced had been rejected as stated above. The Commissioner (Appeals) had rejected t The Commissioner (Appeals) had rejected the claim of wastage of 4.50 per he claim of wastage of 4.50 per cent as on the higher side, however, it was found with the available material cent as on the higher side, however, it was found with the available material cent as on the higher side, however, it was found with the available material that it was not possible to quantify the purchase inflation of old bottles with that it was not possible to quantify the purchase inflation of old bottles with that it was not possible to quantify the purchase inflation of old bottles with accurate precision and the disallowance of 10 per cent would meet accurate precision and the disallowance of 10 per cent would meet accurate precision and the disallowance of 10 per cent would meet the ends of justice, and granted the relief in favour of the assessee barring the 10 per of justice, and granted the relief in favour of the assessee barring the 10 per of justice, and granted the relief in favour of the assessee barring the 10 per cent of disallowance.” cent of disallowance.”

6.2.34 In the light of the decision of the jurisdictional High Court and the In the light of the decision of the jurisdictional High Court and the In the light of the decision of the jurisdictional High Court and the consistent decision taken for the earlier years by the undersigned consistent decision taken for the earlier years by the undersigned consistent decision taken for the earlier years by the undersigned in the appellate order(s) passed u/s 250 of the Act for the AY(s) 2017 appellate order(s) passed u/s 250 of the Act for the AY(s) 2017-18, 2018 18, 2018-19 & 2019-20, the undersigned is of the view that the disallowance to the extent of 20, the undersigned is of the view that the disallowance to the extent of 20, the undersigned is of the view that the disallowance to the extent of 10% would meet the ends of justice. 10% would meet the ends of justice. At the outset, the profit percentage in the At the outset, the profit percentage in the business of manufacturing and sale of manufacturing and sale of Indian Made Foreign Liquor (IMFL) Indian Made Foreign Liquor (IMFL) can vary significantly based on several factors, including the type of liquor, brand vary significantly based on several factors, including the type of liquor, brand vary significantly based on several factors, including the type of liquor, brand positioning, production efficiency, distribution strategies, and regulatory positioning, production efficiency, distribution strategies, and regulatory positioning, production efficiency, distribution strategies, and regulatory conditions. During the course of appellate proceedings, the AR has provided the conditions. During the course of appellate proceedings, the AR has provided the conditions. During the course of appellate proceedings, the AR has provided the details of the net profit to turnover ratio as admitted in the financial statements net profit to turnover ratio as admitted in the financial statements net profit to turnover ratio as admitted in the financial statements of the appellant company for the AY(s) 2020 of the appellant company for the AY(s) 2020-21 to 2022-23, the extract of the 23, the extract of the same is reproduced here as under. same is reproduced here as under.

Sl Particulars Particulars as as 2019-20 2020-21 2021-22 2022-23 reported u/s 139 reported u/s 139 No. of the Act 1 Gross turnover 4019755197 4948770663/- 4331164415 4331164415 4339734105 2 Gross Gross profit profit 1018627340 1342904502 1236791836 1236791836 1119511678 reported 3 Net Net Profit Profit 216197529 380487732 326693496 326693496 200910922 reported as per reported as per books 4 % of net profit 5.38 7.69 7.54 7.54 4.63

Average % of net Average % of net 6.31 profit

6.2.35 The AR, during the course of the appellate proceedings, has pleaded The AR, during the course of the appellate proceedings, has pleaded The AR, during the course of the appellate proceedings, has pleaded that there was a fall in profit for the relevant assessment year(s) more that there was a fall in profit for the relevant assessment year(s) more that there was a fall in profit for the relevant assessment year(s) more particularly AY 2022 particularly AY 2022-23, on account of the nationwide lockdown imposed during 23, on account of the nationwide lockdown imposed during the breakout of COVID pandemic whic the breakout of COVID pandemic which affected both the production as well as h affected both the production as well as sales reduction in the prices of IMFL (Indian Made Foreign Liquor) by the sales reduction in the prices of IMFL (Indian Made Foreign Liquor) by the sales reduction in the prices of IMFL (Indian Made Foreign Liquor) by the purchasing agency, TASMAC, has led to a significant reduction in the profit purchasing agency, TASMAC, has led to a significant reduction in the profit purchasing agency, TASMAC, has led to a significant reduction in the profit margin for the FY 2021 margin for the FY 2021-22, relevant to AY 2022-23. On account o 23. On account of this profit reduction, the AR has requested for consideration of a reduced percentage while reduction, the AR has requested for consideration of a reduced percentage while reduction, the AR has requested for consideration of a reduced percentage while to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt estimating the net profit for the AY 2022 estimating the net profit for the AY 2022-23, rather than the estimated 10 % of 23, rather than the estimated 10 % of the turnover for the earlier years in the appellant company's case. The the turnover for the earlier years in the appellant company's case. The the turnover for the earlier years in the appellant company's case. The undersigned, on careful examination of this issue raised, including a review of ed, on careful examination of this issue raised, including a review of ed, on careful examination of this issue raised, including a review of the appellant's financial statements, observes that the turnover of Rs. the appellant's financial statements, observes that the turnover of Rs. the appellant's financial statements, observes that the turnover of Rs. 433,97,34,105/- for the year in question is consistent with that of previous for the year in question is consistent with that of previous for the year in question is consistent with that of previous years. In light of this, it is held years. In light of this, it is held that the plea raised by the AR that the price that the plea raised by the AR that the price reduction by TASMAC has materially affected the appellant’s income is not reduction by TASMAC has materially affected the appellant’s income is not reduction by TASMAC has materially affected the appellant’s income is not substantiated by the financial data and therefore is not considered. substantiated by the financial data and therefore is not considered. substantiated by the financial data and therefore is not considered.

6.2.36 Based on the above, it is observed that the Based on the above, it is observed that the average average net profit-to- turnover ratio for AYs 2019 turnover ratio for AYs 2019-20 to 2022-231 stands at 6.31%. Having rejected 231 stands at 6.31%. Having rejected the books of accounts, the undersigned by observing the judicial discipline(s) the books of accounts, the undersigned by observing the judicial discipline(s) the books of accounts, the undersigned by observing the judicial discipline(s) and in order to ensure equity and fairness, is of the view that an and in order to ensure equity and fairness, is of the view that an average rate of average rate of 10% of gross turnover of gross turnover would be appropriate to be considered as the net profit. would be appropriate to be considered as the net profit. Accordingly, the balance that requires to be considered in the hands of the Accordingly, the balance that requires to be considered in the hands of the Accordingly, the balance that requires to be considered in the hands of the appellant company for the years under consideration are quantified as under: appellant company for the years under consideration are quantified as under: appellant company for the years under consideration are quantified as under:-

Particulars as 2020-21 2021-22 2022-23 Sl reported u/s 139 No. of the Act 1 Gross turnover 494,87,70,663/- 433,11,64,415/- 433,97,34,105/- 2 Gross profit 134,29,04,502/- 123,67,91,836/- 111,95,11,678/- reported 3 Net Profit 38,04,87,732/- 32,66,93,496/- 20,09,10,922/- reported as per books 4 % of net profit 7.69 7.54 4.63 5. Balance that requires to be 10-7.69= 2.31% 10-7.54=2.46% 10-4.63=5.37% considered 6. % of turnover to 2.31% of 2.46% of 5.37 % of be considered in 494,87,70,663 433,11,64,415 433,97,34,105 the hands of the =Rs.11,43,16,602 =Rs.11,43,16,602/- =Rs.10,65,46,645/- =Rs.23,30,43,721 Rs.23,30,43,721/- appellant

6.2.37 Thus, for the AY(s) 2020 Thus, for the AY(s) 2020-21,2021-22 & 2022-23 the disallowances of 23 the disallowances of expenditure to the extent of Rs. 11,43,16,602/ expenditure to the extent of Rs. 11,43,16,602/- Rs. 10,65,46,645/ Rs. 10,65,46,645/- & Rs.23,30,43,721/- only needs to considered as bogus purchases of old bottles as only needs to considered as bogus purchases of old bottles as against the disallowances contemplated by the AO in the assessment order(s) against the disallowances contemplated by the AO in the assessment order(s) against the disallowances contemplated by the AO in the assessment order(s) passed by the AO for the years under consideration. Accordingly, all the grounds passed by the AO for the years under consideration. Accordingly, all the grounds passed by the AO for the years under consideration. Accordingly, all the grounds raised by the appe raised by the appellant upon the issue of disallowance of expenditure towards llant upon the issue of disallowance of expenditure towards bogus purchase of old bottles for the years under consideration are hereby bogus purchase of old bottles for the years under consideration are hereby bogus purchase of old bottles for the years under consideration are hereby treated as partly allowed partly allowed and the AO is directed to delete the addition made on the addition made on account of bogus old bottle purchases as account of bogus old bottle purchases as under. to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt :: 27 ::

Sl No. AY Amount added Amount added Amount sustained Amount to be Amount to be towards bogus old towards bogus old as per the deleted deleted bottle purchases. ( In bottle purchases. ( In discussions (in Rs.) (in Rs.) Rs.) ( in Rs.) 1 2020-21 Rs. 41,11,59,615 Rs. 41,11,59,615 Rs.11,43,16,602/- Rs. Rs. 29,68,43,013/- (Rs.37,97,84,300 / (Rs.37,97,84,300 /- + Rs.3,13,75,315/ Rs.3,13,75,315/-)

2 2021-22 Rs.56,41,82,236/ Rs.56,41,82,236/- Rs.10,65,46,645/- Rs. 45,76,35,591/ Rs. 45,76,35,591/- 3. 2022-23 Rs.58,23,45,992/ Rs.58,23,45,992/- Rs.23,30,43,721/- Rs. 34,93,02,271/ Rs. 34,93,02,271/-

14. In our opinion, the Ld. CIT(A) had rightly followed the ratio decidendi In our opinion, the Ld. CIT(A) had rightly followed the ratio decidendi In our opinion, the Ld. CIT(A) had rightly followed the ratio decidendi

laid down in the above decision (supra) for rejecting the books of accounts laid down in the above decision (supra) for rejecting the books of accounts laid down in the above decision (supra) for rejecting the books of accounts and estimating the profits of the assessee at 10%. We therefore see no and estimating the profits of the assessee at 10%. We therefore see no and estimating the profits of the assessee at 10%. We therefore see no reason to interfere with the same. Since the facts involved in the lead case reason to interfere with the same. Since the facts involved in the lead case reason to interfere with the same. Since the facts involved in the lead case of AY 2020-21 is common in AYs 21 is common in AYs 2021-22 & 2022-23, our foregoing findings 23, our foregoing findings shall be followed mutatis mutandis mutatis mutandis in the appeals for AYs2021-22 & 2022 22 & 2022-23 as well. Hence, all the grounds raised by the assessee and the Revenue on as well. Hence, all the grounds raised by the assessee and the Revenue on as well. Hence, all the grounds raised by the assessee and the Revenue on this issue in AYs 2020 this issue in AYs 2020-21 to 2022-23 stands dismissed.”

Useful reference in this regard may be Useful reference in this regard may be made to the decision of Hon’ble made to the decision of Hon’ble Andhra Pradesh High Court in the case of Andhra Pradesh High Court in the case of Indwell Constructions Vs. Indwell Constructions Vs. CIT (232 ITR 776) and Hon’ble Allahabad and Hon’ble Allahabad High Court in the case of the case of CIT vs Banwari Lal Banshidhar (229 ITR 229) vs Banwari Lal Banshidhar (229 ITR 229). In view of the foregoing In view of the foregoing, we do not agree with this plea of the Revenue. we do not agree with this plea of the Revenue. We thus do not see any do not see any infirmity in the order of the infirmity in the order of the Ld. CIT(A) in deleting these separate deleting these separate additions, as the total income of total income of the assessee had been estimated upon the assessee had been estimated upon to 1615 1613 to 1615 /Chny/2025 & & 1548/Chny/2025 & 1548/Chny/2025 (AYs 2018 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. M/s. Southern Agrifurane Industries Pvt rejection of the books of accounts. books of accounts. Accordingly, the grounds raised by the Accordingly, the grounds raised by the Revenue in this regard stands dismissed. Revenue in this regard stands dismissed.

Relying on the statement of Shri Augustine Paulraj, the AO treated both Relying on the statement of Shri Augustine Paulraj, the AO treated both Relying on the statement of Shri Augustine Paulraj, the AO treated both the donations made to registered charitable trusts, aggregating to the donations made to registered charitable trusts, aggregating to the donations made to registered charitable trusts, aggregating to Rs.1,25,00,000/- to be bogus and accordingly disal to be bogus and accordingly disallowed the deduction so lowed the deduction so claimed u/s 80G of the Act. claimed u/s 80G of the Act.

Having perused his statement, it is seen Having perused his statement, it is seen that nowhere had Shri Augustine that nowhere had Shri Augustine Paulraj stated that the donation made to Paulraj stated that the donation made to M/s Radiant Institute of M/s Radiant Institute of Technology was bogus or that it was returned back in cash. Rather, it is was bogus or that it was returned back in cash. Rather, it is was bogus or that it was returned back in cash. Rather, it is observed that in his answers to Q Nos. 25 & 26, he had categorically observed that in his answers to Q Nos. 25 & 26, he had categorically observed that in his answers to Q Nos. 25 & 26, he had categorically stated that, the assessee had paid donation to e assessee had paid donation to M/s Radiant Institute of M/s Radiant Institute of Technology by cheque and that the donation was for educational purpose by cheque and that the donation was for educational purpose by cheque and that the donation was for educational purpose under their corporate social responsibility. We thus note that, there was under their corporate social responsibility. We thus note that, there was under their corporate social responsibility. We thus note that, there was nothing incriminating whatsoever contained in the stat nothing incriminating whatsoever contained in the stat nothing incriminating whatsoever contained in the statement of Shri Augustine Paulraj basis which any prudent person could construe the Augustine Paulraj basis which any prudent person could construe the Augustine Paulraj basis which any prudent person could construe the donation made by the assessee to donation made by the assessee to M/s Radiant Institute of Technology M/s Radiant Institute of Technology to be not genuine. In fact, we find that, his statement supports the veracity be not genuine. In fact, we find that, his statement supports the veracity be not genuine. In fact, we find that, his statement supports the veracity of the impugned donation. T of the impugned donation. The Ld. AR further brought to our notice that, he Ld. AR further brought to our notice that, M/s Radiant Institute of Technology M/s Radiant Institute of Technology was approved by the was approved by the competent authority at the time of the donation authority at the time of the donation had been made, and they held valid , and they held valid registration u/s 80G of the Act u/s 80G of the Act. For the aforesaid reasons, we find tha . For the aforesaid reasons, we find that, the Ld. CIT(A) had rightly allowed the deduction claimed by the assessee the Ld. CIT(A) had rightly allowed the deduction claimed by the assessee the Ld. CIT(A) had rightly allowed the deduction claimed by the assessee in relation to the donation given to in relation to the donation given to M/s Radiant Institute of Technology M/s Radiant Institute of Technology and deleted the disallowance made by the AO u/s 80G of the Act. and deleted the disallowance made by the AO u/s 80G of the Act. and deleted the disallowance made by the AO u/s 80G of the Act.

crucially observed that, Shri Augustine Paulraj had clearly stated that M/s crucially observed that, Shri Augustine Paulraj had clearly stated that M/s crucially observed that, Shri Augustine Paulraj had clearly stated that M/s Prerna Foundation was involved in educational activities and the assessee undation was involved in educational activities and the assessee undation was involved in educational activities and the assessee had donated Rs.75,00,000/ had donated Rs.75,00,000/-. It was when the Investigating authority . It was when the Investigating authority asked him whether such donation was received back in cash, that he asked him whether such donation was received back in cash, that he asked him whether such donation was received back in cash, that he stated that, he did not have direct knowledge of the mat stated that, he did not have direct knowledge of the matter and that he ter and that he understands that the donation may have been received back in cash. It is understands that the donation may have been received back in cash. It is understands that the donation may have been received back in cash. It is evident that this assertion made by Shri Paulraj was predicated on evident that this assertion made by Shri Paulraj was predicated on evident that this assertion made by Shri Paulraj was predicated on surmises and assumptions and that there was no clear admission to surmises and assumptions and that there was no clear admission to surmises and assumptions and that there was no clear admission to receipt of cash in lieu of donatio receipt of cash in lieu of donation. Moreover, it is by now well settled in n. Moreover, it is by now well settled in law that, no addition/disallowance can be made by solely relying on law that, no addition/disallowance can be made by solely relying on law that, no addition/disallowance can be made by solely relying on confessions made during the course of search, in absence of any confessions made during the course of search, in absence of any confessions made during the course of search, in absence of any corroborative material found to back the same. We gainfully refer to the corroborative material found to back the same. We gainfully refer to the corroborative material found to back the same. We gainfully refer to the CBDT Circular F No. 286/2/2003 ular F No. 286/2/2003-IT(Inv) dated 10.03.2003 IT(Inv) dated 10.03.2003 and the decisions of Hon’ble Delhi High Court in the case of decisions of Hon’ble Delhi High Court in the case of Pr.CIT Vs Best Pr.CIT Vs Best Infrastructure (I) Pvt Ltd (397 ITR 82) Infrastructure (I) Pvt Ltd (397 ITR 82) and Hon’ble Bombay High Court in and Hon’ble Bombay High Court in the case CIT Vs Harjeev Aggarwal (241 Taxmann 199), amongst CIT Vs Harjeev Aggarwal (241 Taxmann 199), amongst CIT Vs Harjeev Aggarwal (241 Taxmann 199), amongst others, wherein it was held that statements recorded u/s 132(4) cannot wherein it was held that statements recorded u/s 132(4) cannot wherein it was held that statements recorded u/s 132(4) cannot be the sole basis to make addition(s) in the hands of the assessee. sole basis to make addition(s) in the hands of the assessee. sole basis to make addition(s) in the hands of the assessee.

Order pronounced on the 01st day of December, 2025 Order pronounced on the 25, in Chennai.